Comtech Telecommunications (NASDAQ:CMTL) reported improved profitability and cash generation in fiscal 2026 while advancing its plan to sell most of its satellite and space communications business and focus on its Allerium public safety operations and retained cybersecurity training services.
Management said the proposed sale of most of the Satellite and Space business to an affiliate of Gilat Satellite Networks is expected to close by the end of calendar 2026, subject to regulatory approval and other closing conditions. The transaction carries a purchase price of $157.5 million, including a $10 million advance payment received upon signing. Comtech expects to receive an additional $128.3 million in net cash proceeds at closing, excluding proceeds from retained assets.
Fiscal-Year Results Show Margin and Cash-Flow Improvement
For fiscal 2026, Comtech recorded net sales of $249.6 million, down from $300.9 million a year earlier. CFO Mike Bondi said the prior-year total included nearly $49 million of revenue from legacy U.S. Army VSAT and GFSR contracts that were largely wound down in fiscal 2025. Those contracts produced only $1.7 million in gross profit during the prior year.
Excluding the legacy contracts, fiscal 2026 sales were broadly comparable with the prior year, Bondi said. Gross profit rose to $97.2 million, or 38.9% of sales, from $95.2 million, or 31.6% of sales, in fiscal 2025. The higher margin reflected greater adoption of the company’s solutions and a transition from initial deployments to recurring monthly revenue streams.
The company reported a GAAP operating loss of $18.2 million, improved from a $29.9 million loss in fiscal 2025. Fiscal 2026 results included $14.8 million of intangible amortization, $10 million of restructuring costs, $3.1 million of stock-based compensation and $1.2 million of CEO transition costs. On an adjusted basis, operating income was $10.8 million, or 4.3% of sales, compared with $7.6 million, or 2.5% of sales, a year earlier.
Adjusted EBITDA increased to $20.6 million, or 8.3% of sales, from $16.4 million, or 5.5% of sales, in fiscal 2025. Operating cash flow was $25 million, compared with an outflow of $29.2 million in the prior year. Including discontinued operations, consolidated operating cash inflow was $37.4 million, compared with an $8.3 million outflow in fiscal 2025.
Chairman, President and CEO Ken Traub said the company generated positive consolidated operating cash flow in each of the six quarters since he took over as CEO in January 2025, following seven consecutive quarters of operating cash outflows. He said liquidity reached more than $61 million at fiscal year-end.
Fourth-Quarter Margins Expanded
Fourth-quarter fiscal 2026 sales were $66.2 million, compared with $75.3 million in the year-earlier quarter. The prior-year period included roughly $8 million of sales from the legacy VSAT contract. Excluding that contract, Bondi said lower sales of location-based and call-handling solutions were partly offset by higher sales of Next Generation 911, or NG911, solutions and cybersecurity training services.
Quarterly gross profit increased to $26.9 million, or 40.6% of sales, from $26.2 million, or 34.7% of sales, a year earlier. Adjusted EBITDA rose to $9.2 million, or 13.9% of sales, from $7.5 million, or 10% of sales.
Comtech reported a fourth-quarter operating loss of $3.9 million, compared with a loss of $800,000 a year earlier. The more recent quarter included $5.7 million of restructuring costs, $3.6 million of intangible amortization and $1 million of stock-based compensation. Excluding specified items, fourth-quarter operating income was $6.5 million, or nearly 10% of sales, versus $5.1 million, or 6.7% of sales, in the prior-year quarter.
Cash provided by operating activities totaled $18.5 million during the fourth quarter, compared with $1.2 million of cash used in the prior-year period.
Sale Proceeds Intended to Reduce Debt
Comtech plans to use proceeds from the Gilat transaction to substantially reduce debt and then pursue a broader recapitalization. Under its credit agreement, 65% of net transaction proceeds will go toward prepaying the credit facility, while 35% will be applied to subordinated debt, beginning with the remaining portion of a $35 million subordinated priority term loan.
At July 31, the company had $108.5 million outstanding under its credit facility and $102 million outstanding under its subordinated credit facility, including paid-in-kind interest. Its convertible preferred stock had a liquidation preference of $223.2 million. Available liquidity totaled $61.3 million at fiscal year-end, including $34 million of qualified cash and cash equivalents and $27.3 million of revolver capacity. As of Oct. 13, liquidity was approximately $51.3 million.
Management expects transition-related costs of approximately $13 million to $15 million, largely in fiscal 2027 and partly in fiscal 2028, as it realigns the company around Allerium. After about one year of transition implementation, Comtech estimates annual cost savings of approximately $16 million to $18 million. Based on those assumptions, the company estimated that pro forma adjusted EBITDA for fiscal 2026 would have been about $37 million to $39 million.
Allerium Cites Recurring Revenue and Product Opportunities
Allerium entered fiscal 2027 with $520.4 million of funded backlog, up from $506.3 million a year earlier, and approximately $862 million in revenue visibility when unfunded contract value is included. Fiscal 2026 bookings were $263.7 million, producing a book-to-bill ratio of 1.06. Management said roughly 80% of Allerium’s annual revenue is recurring.
Jeff Robertson, president of Allerium, said the business secured a multiyear extension worth more than $130 million with its largest customer, a U.S. telecommunications company. He also cited NG911 deployments in Kentucky and Canada, including more than 60 Canadian upgrades during the fiscal year.
Robertson highlighted two newer offerings: Mira, a cloud-based emergency call-handling platform operating over secure NG911 networks, and Coral, which is designed to deliver and correlate data from sources such as wearables, vehicle telematics and cameras alongside emergency calls. He said Mira is in beta and that the products could be sold to existing network customers as additional services.
During the question-and-answer session, management declined to provide fiscal 2027 revenue or earnings guidance. Bondi disclosed subsequent orders including a $3 million Canadian government order for a Guardian deployment and more than $2.3 million from a domestic Tier 1 mobile-network carrier for security features and enhancements.
Comtech also announced leadership changes tied to the transition. Rich Nyren joined as executive vice president of finance and is expected to become CFO after Bondi’s departure following the filing of the fiscal first-quarter 2027 10-Q. Amy Rothstein-Hovey joined as general counsel and is expected to become chief legal officer and corporate secretary following the anticipated departure of Don Walther after the Gilat transaction closes.
About Comtech Telecommunications (NASDAQ:CMTL)
Comtech Telecommunications Corp. (NASDAQ: CMTL) is a technology company that develops and supplies communications infrastructure and network solutions for government, defense, public safety, telecommunications, and enterprise customers. Its offerings are designed to support connectivity in locations where reliable, secure, or resilient communications are required.
The company’s products and services have included satellite modems and terminals, satellite ground systems, troposcatter and other wireless communications equipment, network management software, and location-based technologies.
